Abstract
Asia is now well recognized and acclaimed as a growth pole of the global economy. The dynamism of Asian transition is based on building innovative capabilities and modernizing the national innovation system. Asia has allocated higher resources to research and development (R&D) during last three decades. In terms of R&D expenditure, the Asian region has incurred the highest proportion, that is, 42.2 per cent, of the global economy and ranked as number one (UIS, 2015). The gap in terms of R&D intensity between Asia and Europe and North America has reduced during 1991–2013 (UNESCO, 2015). However, in terms of output indicators, the Asian region is lagging behind. This lag in investment in innovation activities and output indicators is understandable. But the pace of catch-up of Asia is remarkable (Lee, 2013), which is shown from the increasing importance of intellectual property rights in the development processes of these economies.
What factors promote innovation is a key issue for economic and industrial development in the Asian countries. A variety of social and economic mechanisms, including the strength of intellectual property rights (IPRs), the international harmonization of IPRs, the science and technology policy conducted by governments at several levels and in categories to support firm’s innovative activities, and the competition and collaboration among firms and universities, are expected to positively affect the innovative activities. Five papers included in this special issue review the previous studies on innovations and development and provide interesting results of theoretical and empirical examinations on what factors affect the innovation, particularly focusing on Asian countries.
There are two different views on whether the stronger IPRs enhance or retard industrial development in developing countries. Policymakers in developing countries sometimes assert that the success of high-tech industries in developing countries is a confirmation of the view that keeping IPR systems weak at certain stages of economic development can function as an infant industry policy, stimulating the growth of technologically dynamic indigenous firms. On the other hand, empirical evidence by many economists suggests that stronger IPR systems accelerate industrial development. The first paper by Branstetter surveys the previous literature which examined the relation between IPR and economic and industrial development, and discusses whether delaying the embrace of strong IP has led to dynamic growth and whether the emergence of innovative strength or the stronger IPR systems accelerate industrial development. Reviewing recent theoretical and empirical papers on how changes in IPR policy impact industrial development, the author introduces many studies of the impact of weak patents on the nature and direction of innovation in Japan, South Korea, Taiwan, China and India, and finds that much of the evidence suggests that stronger IPR systems accelerate industrial development in Asia. The author emphasizes that Asia is not really different from other regions. The paper concludes that the current challenges faced by Asian firms in technologically dynamic industries suggest that long periods of industrial development under weak IPR systems can create problems in the longer run.
The patent system plays a major role in pharmaceutical industry. It works as a property rights system and provides incentives to innovators to invest in R&D or commercialization. Protection of drugs by the patent system is also a political issue because pharmaceutical directly affect public welfare. During the negotiation of the Trade-Related Aspects of Intellectual Property Rights Agreement (TRIPS) in the early 1990s, one of the main confrontational issues between the developed countries and the developing countries was the protection of pharmaceutical patents. Even in the negotiation of the Trans-Pacific Partnership Agreement signed in February 2016, the protection of pharmaceutical IPRs was one of the more difficult issues. Based on the patent database of all the significant drugs introduced in the Japanese market, the paper by Okada and Nagaoka empirically investigates whether the institutional setting of a country such as the patent examination and the legal systems affect the patenting behaviours of pharmaceutical firms. They find that (i) the global spread of pharmaceutical patent protection was indeed very significant, (ii) the filing propensity and the grant rate of major Asian countries approached those of the OECD economies by the early 2000s for chemical substance inventions, but those for inventions of medical use or inventions of pharmaceutical formulation or combination of drugs were smaller compared to those for USA and Europe and (iii) the grant rate for both inventions of crystal inventions and medical use in India is at a low of 50 per cent compared to those of other nations. They also discover that there exists a substantial heterogeneity in patent grant standards with respect to drug patents and that the patent law revision in China in 1993 had an immediate and significant positive impact on the patent filing propensity in China (30 percentage point increase) and the mailbox application system in India had a substantial effect in strengthening drug protection: the filing propensity reached 80 per cent of the number of corresponding European patent applications by 2000. The results of their research emphasize the important effect of the harmonization of patent granting standards on patent propensity.
R&D and other innovative activities are not conducted separately between firms and universities. Firms and universities maintain a network for innovation since both are complementary. How the linkage between firms and universities promotes innovation is another important issue to examine. There have been many studies which have given considerable attention to collaborative research between firms and universities in a given country (Lee, 2010; Singh & Gill, 2016). Firms’ collaborations with foreign universities, however, have received comparatively little attention. The paper by Suzuki examines the impact of cross-border university–industry (U-I) joint research on firm technological performance. Referring to the previous literature on international alliances for innovative activities which shows the advantages of international alliances, the author examines three hypotheses: (i) there are increasing research collaborations with foreign universities, (ii) there is a greater research capability in the partner university in U–I joint research and (iii) the existence of a firm’s subsidiary in the country of the partner university in U–I joint research, has positive impacts on firm technological performance. Using a panel dataset of 107 Japanese manufacturing firms covering the period 2001–2004, Suzuki statistically examines how the international co-publication count, the scientific research quality of partner, and the existence of the subsidiary in partner’s country affect the number of firm-level patent applications and counts, based on negative binomial count data model. The paper finds that the international joint research with universities has a positive impact on firm technological performance, that is, firm’s technological performance is higher if it owns foreign affiliates in the country of its partner universities, but the co-authorship with foreign universities does not affect firm’s technological performance. It suggests that firms should carefully choose their partner universities with regard to research quality and establish an adequate business base in the country of the partner universities.
Firms decide the optimal investment for innovation under conditions of competition with their rivals, the subsidy and tax exemptions provided by the government, and the consumer’s preference for their products. How firms respond to the competitor’s behaviour, consumer’s choice and the government policy affects innovation. The competition in the car market in Malaysia provides a case for discussing this issue. The article by Bakar and Basri theoretically and statistically analyses what factor affects a firm’s decision for innovation and consumer’s choice of quality. In Malaysia, there exists a competition between domestic car makers and imported cars. The foreign firm exports the hybrid car to the home market and competes à la Bertrand with the home firm. The home government subsidizes the innovation (the quality improvement) of the home firm. Furthermore, home country’s government promotes the import of hybrid cars by subsidizing (tax exemption) the import because of environmental reasons. The question is what optimal government policy and firm’s decision are needed for promoting the innovation of domestic firms and how the consumer perceives the quality improvement and decides its demand? The theoretical discussion in the paper shows that an increase in investment in hybrid technology innovation increases the hybrid car’s demand. The empirical part of the paper finds that consumers in Malaysia value improvement of quality, not in all the attributes but in specific quality factors: the battery-warranty, CO2 and engine sound. The article suggests that even if the firm invests in innovation by creating a better-quality car, every quality improvement may not necessarily affect demand, and concludes that the government should concentrate on innovation for some quality improvement which precisely reflects consumer’s preference.
The Chinese government rapidly increased the expenditure on science and technology (S&T) during the 2000s. Not only national-level government, but also provincial-, city- and prefecture-level governments in China have implemented various types of S&T policy. Although there are a number of studies to investigate the effectiveness of S&T policy conducted by the central government in China, there are few researches to evaluate the performance of S&T policies by local governments in China. The paper by Ito, Li and Wang studied empirically, using the propensity score matching approach by the level of government and policy category, which policy level stimulate how much the firm’s innovation activities. The analysis of the paper has an advantage in the unique data set: it has nearly 400 observations collected by the city government agency in 2012 which cover the manufacturing and service industries, and has information on more than 20 individual policy categories and three proxies for innovation: number of IPRs applications, new products and new process improvements. The authors find that the S&T policy by the local government is effective, certification and commercialization policies are more effective than other policies, and the treatment impact of tax incentives is statistically insignificant. The paper concludes that the policies implemented by a lower level of government and the policies to provide innovation-related services without direct financial subsidy are the most effective tools for stimulating firm’s innovation activities. This research concludes that some policies (e.g. financial and tax policy) may result in moral hazard or opportunistic behaviour, and the subsidized firms do not, in practice, conduct innovation activities, and that it would be beneficial to evaluate and restructure the policy framework, in order to maintain the efficiency of the substantial S&T fiscal expenses.
We hope that the above papers in this special issue would be received well by the readers and stimulate more theoretical and empirical research on the issue of IPRs and innovation in the Asian region.